Andre Rahadian (Partner), Winda Tania (Partner), and Imam Ibnu (Senior Associate)

Introduction to Nusantara Capital City

Upon the promulgation of Law 3/2022, Nusantara Capital City (“IKN”) officially became the Capital
of the Republic of Indonesia, and the IKN Authority ("OIKN") was established as a ministry-level
organization that has the authority to exercise State Capital Regional Governance although DKI
Jakarta's authority as a Special Capital Region will remain until the President issues a Presidential
Decree that officializes the transition from DKI Jakarta to IKN.
IKN Administrative Territory

Source: Delineation Map of IKN as issued in the Appendix of Law 3/2022 & Appendix to the Head of OIKN Circular Letter: 01/SE/Head of IKN
Authority/X/2022 on the Promulgation of One Map, One Planning, One Policy (1 MPP)

In accordance with Law 3/2022 and Presidential Regulation 63/2022, IKN has a total area of 324.332
hectares, including 256.143 hectares of land and 68.189 hectares of sea. The IKN land area is divided into
the Nusantara Capital Development Area ("KPIKN") comprising 199.962 hectares, the Nusantara Capital
Area ("KIKN") comprising 56.180 hectares, and the Central Government Core Area ("KIPP") comprising
6.670 hectares. As a region, it shares the following borders with other regions:
• Northern Border: Loa Kulu Subdistrict, Loa Janan Subdistrict, and Sanga-Sanga Subdistrict, and Kutai
Kartanegara Regency;
• Southern Border: Penajam Subdistrict, Northern Penajam Paser Regency, Bay of Balikpapan, Western
Balikpapan Subdistrict, Northern Balikpapan Regency, and Eastern Balikpapan Subdistrict, Balikpapan
City;
• Eastern Border: Makassar Strait; and
• Western Border: Loa Kulu Subdistrict, Kutai Kartanegara Regency and Sepaku Subdistrict, Penajam
Paser Utara Regency.

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Furthermore, Presidential Regulation 62/2022 distributes the IKN planning area as follows in relation to the
development of the IKN:
IKN PLANNING AREA (WILAYAH PERENCANAAN/WP)

Source: Presidential Regulation 64/2022 & Appendix to the Head of OIKN Circular Letter: 01/SE/Head of IKN Authority/X/2022 on the
Promulgation of One Map, One Planning, One Policy (1 MPP)

Based on the above map, Presidential Regulation 64/2022 outlines the following development plans for
each WP:
IKN AREA DEVELOPMENT PLAN
Planning Area Development Plan
WP KIPP National Government Center (state palace, ministry office, diplomatic compound, etc.)
Defense and Security
Housing
WP IKN Selatan Renewable Energy
Rural Settlement
Defense and Security
WP IKN Barat Economic, business and financial center
Nature tourism
Health services
Higher education services
Defense and Security
WP IKN Timur 1 Entertainment center (International Amusement Park), Sports Center
Tourism
Trade & Services
Higher education services
Defense and Security
WP IKN Timur 2 Higher education services
Research & innovation center
Trade & Services
Office Center
Health services
WP IKN Utara Research & innovation center
Higher education services
Office Center
Tourism

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 Planning Area Development Plan
WP IKN Simpang Samboja Regional commodity distribution & trading center

Housing
WP Kuala Samboja Center for agro-industry and food industry
Housing
WP Muara Jawa Public service center
Agriculture & fisheries-based activity centers

Housing
Source: Presidential Regulation 64/2022 & Appendix to the Head of OIKN Circular Letter: 01/SE/Head of IKN Authority/X/2022 on the Promulgation of One Map, One
Planning, One Policy (1 MPP)

Land Status and Transfer of Land Rights

Land ownership and rights are one of the most essential factors to consider when making an investment. In
this regard, the Indonesian government has issued Presidential Regulation 65/2022, which regulates the
acquisition and administration of land in IKN. In accordance with Presidential Regulation 65/2022, the
acquisition of land in IKN is carried out through the mechanism of releasing forest areas and/or land
acquisition, which is implemented in accordance with statutory regulations. Land acquired in IKN through
the releasing of forest areas and/or land acquisition is designated as state-owned assets ("Barang Milik
Negara/BMN") and/or assets under authority possession ("Aset Dalam Penguasaan/ADP").

Land in IKN that is designated as BMN is land related to government administration and the Right of Use is
granted to OIKN and/or ministries or institutions for an indefinite period of time and according to its
designation.
Meanwhile, for land in IKN that is designated as ADP, the Right to Manage ("Hak Pengelolaan/HPL") is
given to OIKN, whereby OIKN, as the holder of HPL, is granted the authority, including authority regarding
the use and utilization of all or part of the HPL land for its own use or in collaboration with other parties.
HPL where the use and utilization of all or part of the land is subject to cooperation with other parties can be
attached to Land Rights in the form of Right to Cultivate (“Hak Guna Usaha/HGU”), Right to Build (‘Hak
Guna Bangunan/HGB’), or Right of Use (“Hak Pakai/HP”) on HPL based on land utilization agreements in
accordance with statutory provisions. In light of the preceding, GR 12/2023 contains the following
provisions regarding the granting of Land Rights on OIKN’s HPL:

GENERAL PROVISIONS REGARDING THE GRANT OF LAND RIGHTS IN IKN

LAND
DESCRIPTION PERIOD
RIGHTS
HGU the right to A maximum of 95 years
cultivate land through the first cycle with
directly stages:
controlled by the a) Granting of rights, for a
State, for maximum of 35 years;
agricultural, b) Extension of rights for a
fishery, or maximum of 25 years; and
livestock c) Renewal of rights for a
enterprises maximum of 35 years
Within the 10 years prior to the
end of the first HGU cycle,
business actors may apply for
the HGU to be re-granted for a
second cycle, with a maximum
period of 95 years.
OTHER PROVISIONS
 The granting of Land Rights in the form of
HGU is subject to Duty on the Acquisition
of Land and Building Rights (Bea
Peralihan Hak atas tanah dan
Bangunan/BPHTB) at a rate of 0% (zero
per cent) of the acquisition value for a
certain period of time that will be further
provided for in an OIKN regulation.
 Land Rights in the form of HGU can be
transferred, inherited, or encumbered with
mortgage rights after obtaining approval
from OIKN. Parties who obtain the
transfer of land rights referred to above
must pay BPHTB at a rate of 0% (zero
per cent) for a certain period of time that
will be further provided for in an OIKN
regulation.

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 LAND
DESCRIPTION PERIOD
RIGHTS
HGB the right to A maximum of 80 years through
construct a the first cycle with stages:
building on land a. Granting of rights for a
without ownership maximum of 30 years;
of the land b. Extension of rights for a
maximum of 20 years; and
 Land Rights in the form of HGB can be
c. Renewal of rights for a
maximum of 30 years
In the event that the period for
HGB granted for the first cycle
expires, the HGB may be granted rate of 0% (zero per cent) for a certain period of
again for a second cycle if it is
agreed upon.
HP - A maximum of 80 years through
the first cycle with stages:
a. Granting of rights for a
maximum of 30 years;
b. Extension of rights for a
maximum of 20 years; and
c. Renewal of rights for a
maximum of 30 years
In the event that the period for HP OIKN. Parties who obtain the transfer of land
granted for the first cycle expires,
the HP may be granted again for
a second cycle if it is agreed.
OTHER PROVISIONS
 The granting of Land Rights in the form of HGB
is subject to BPHTB at a rate of 0% (zero per
cent) of the acquisition value for a certain period
of time that will be further provided for in an
OIKN regulation.
transferred, inherited, or encumbered with
mortgage rights after obtaining approval from
OIKN. Parties who obtain the transfer of land
rights referred to above must pay BPHTB at a
time that will be further provided for in an OIKN
regulation.
 In the event that the HGB land is built on in the
form of a residential property and a transfer is
made to the public, the following provisions
apply:
a. For a landed house, the HGB may be
upgraded to right of ownership; or
b. For vertical housing, the right of ownership
for the vertical housing unit is granted,
after obtaining approval from OIKN
 The granting of Land Rights in the form of HP is
subject to BPHTB at a rate of 0% (zero per
cent) of the acquisition value for a certain period
of time that will be further provided for in an
OIKN regulation.
 Land Rights in the form of HP can be
transferred, inherited, or encumbered with
mortgage rights after obtaining approval from
rights referred to above must pay BPHTB at a
rate of 0% (zero per cent) for a certain period of
time that will be further provided for in an OIKN
regulation.

In addition, Presidential Regulation 65/2022 provides that, in order to control the transfer of land rights in
IKN, OIKN has the right to be given priority in the purchase of land in IKN, and that any transfer of land
through sale and purchase must be approved by the head of OIKN.
In connection with the above, the Governor of East Kalimantan has issued Decree of the Governor of East
Kalimantan Number 590/K.771/2022 dated November 10, 2022, concerning the Determination of the
Location of Land Acquisition for Infrastructure Development of the National Capital City Phase 1 in Sepaku
Sub-district, North Penajam Paser Regency, East Kalimantan Province, with an area of approximately
345.81 hectares, which is divided into Bukit Raya Village and Bumi Harapan Village.
IKN PUBLIC-PRIVATE PARTNERSHIP
Article 3 of GR 17/2022 provides that funding for the preparation, development, and relocation of the
National Capital City and the Implementation of Special Regional Government of the IKN may come from: (i)
the State Budget ("APBN"); and/or (ii) other legal sources in accordance with the provisions of applicable
laws and regulations. The above-mentioned funding scheme derived from the APBN and other legal
sources comprises:
a. Funding schemes derived from:
i. BMN utilization and/or ADP utilization;
i. Use of PPP or IKN PPP schemes; and
ii. Participation of other parties, including the assignment of business entities whose shares are partially
or wholly owned by the state, strengthening the role of state-owned legal entities, and creative
financing.
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a. Funding schemes other than those referred to above.
In relation to the above, OIKN as a Government Contracting Agency (“GCA”) may enter into cooperation with
business entities for the provision of infrastructure, which can be carried out through: (i) a PPP scheme in
accordance with the provisions of laws and regulations; or (ii) an IKN PPP based on the provisions and
procedures stipulated in GR 17/2022.
PPP IKN is implemented in the following stages:
a) Planning;
b) Preparation;
c) Transaction; and
d) Implementation of the Cooperation Agreement.
The Government of the Republic of Indonesia has issued laws and regulations as derivatives of GR 17/2022
in order to implement the PPP IKN scheme, this includes Bappenas Regulation 6/2022, Ministry of Finance
Regulation 220/2022, and National Procurement Agency Regulation 1/2023. The implementation of the IKN
PPP scheme deviates from conventional PPP in numerous key aspects, including the following:
KEY DIFFERENCES OF IKN PPP AND CONVENTIONAL PPP
Aspect IKN PPP Conventional PPP
Government Contracting  Minister/ Head of State Institutions/ Head of  Minister/ Head of State Institutions/
Agency Regional Government; Head of Regional Government; or
 President Director of State/ Regional Owned  President Director of State/
Enterprises; or Regional Owned Enterprises
 Head of Nusantara State Capital Authority, subject to provision within sectoral
According to their respective functions regulation.
Scope of Infrastructure Based on IKN Masterplan and Details of IKN Limited to sectors based on Bappenas
available to be financed Masterplan (Law 3/2022 and PR 63/2022) Regulation 4/2015 in conjunction with
Bappenas Regulation 2/2020
Return on Investment  Availability Payment  Availability Payment
Scheme  User Charge  User Charge
 Other form of return on investment unrelated  Other form of return on investment.
to services provided.
IKN PPP allows a combination of AP with other
forms of return on investment scheme and
government support (e.g., AP + VGF or AP +
Tariff)
Implementation timeline Procedures conducted in a short timeline, e.g.,In comparison, financial close in
financial close must be achieved at least 4 Conventional PPP must be achieved
months (with extension of 2 months) after the at least 12 months (with extension of 6
PPP agreement signed. months) after the PPP agreement
signed.
Government Guarantee  The guarantee is carried out by the Minister The provision of guarantees is
of Finance together with the Infrastructure provided in accordance with the GCA's
Guarantee Business Entity. proposal and is carried out separately
 The determination of the guarantee method, from the submission of other required
guarantee needs, and guarantee value will support.
be carried out through the IKN Government
Support Determination Meeting.
Viability Gap Funds (‘VGF”) There are simplifications in the provision of Proposal for VGF is carried out
VGF, including through: through several stages, including:
a) Amount Approval; and a) Principle Approval;
b) VGF Letter. b) Amount Approval;
c) Final Approval; and
d) VGF Letter
Procurement of the Solicited: May be implemented through a
Implementing Business Entity May be implemented through a one-stage prequalification mechanism followed
tender, two-stage tender, or Merger of by a one-stage tender, two-stage
Prequalification and Tender process. tender, or a direct appointment.
Unsolicited:
May be implemented through a one-stage
tender, Merger of Prequalification and Tender
process, Swiss Challenge, or Direct
Appointment schemes.
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NUSANTARA CAPITAL CITY BUSINESS OPPORTUNITIES
The IKN Master Plan provides that the stages of the process take into account the development goals and all
necessary processes, including the readiness of the location and resources required for IKN development. In
general, the population increase in IKN is centered in KIKN. According to the IKN timeline, the IKN
development period started in 2022, and in the long-term IKN planning period, it is projected until 2045.The
development is divided into five stages, as follows:
a) Stage 1 (2022 – 2024);
b) Stage 2 (2025 – 2029);
c) Stage 3 (2030 – 2034);
d) Stage 4 (2035 – 2039); and
e) Stage 5 (2040 – 2045).
The details of the IKN Master Plan outline that Stage 1 of the development of the IKN in 2022–2024 is the
initial stage of the development and relocation of the national capital. In the first stage, the transfer of ASN,
TNI, and police will begin in the IKN. The relocation of the representation of the executive, legislative, and
judiciary, as well as ASN and TNI/Polri will be carried out in 2024. In Stage 1, government offices, ASN, TNI,
and police housing will be built, along with all environmental infrastructure, public facilities, and social
facilities. Facilities and infrastructure for accommodation, food, and beverages will also be prepared for
construction workers, as will defense and security elements for site security. Development in the IKN in Stage
1 is focused on KIPP with the main infrastructure and transportation routes still under construction and
targeted to be utilized in 2024 when ASN starts moving to the IKN.
In relation to investment potential opportunities, the detailed IKN Master Plan outlines several infrastructure
development plans that can be carried out with the IKN PPP scheme, including the following:

PPP IKN PROJECT OPPORTUNITY

Sectors Description Location Indicated implementation Year

Government Offices and Several government offices KIPP – WP 1A, 2024
Housing (including vertical and landed WP 2, WP 4, and
housing) is open to be funded WP 5
through PPP scheme.
Health Infrastructure  International standard hospital; KIPP and KIKN 2023 & 2024
 Laboratory with Bio Safety
Level of 3 and could be
upgraded to 4;
 Improvement of existing health
care facilities.
Electricity Development of electricity KIPP, KIKN, and 2024
infrastructure including but not KPIKN
limited to solar panels, solar farm,
energy reserve and storage, gas
insulated substation, distribution
and transmission unit
Waste Treatment Waste treatment infrastructure for, Integrated Waste 2024
including but not limited to, Management
household waste, industrial waste, Sites for KIPP
hazardous waste, and waste to service areas
energy.
Domestic Water Waste Subject to further development of KIPP 2024
Treatment IKN.
Drinking Water System drinking water treatment plant and Outside KIPP 2024
distribution unit (near the Sepaku
River intake)
Roads Partial development of roads KIPP 2024
within KIPP and toll roads to
connect KIPP with supporting
cities.

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If a business entity wishes to become the initiator in the aforementioned initiatives, it may submit an
Expression of Interest in accordance with the stages outlined in Bappenas Regulation 6/2022. In order to
provide adequate information to all potential investors planning to invest in IKN, OIKN has issued Head of
OIKN Circular Letter Number 02/SE/Head of IKN Authority/XI/2022, which outlines interim guidelines for the
transmission of information to prospective investors.
Additionally, in order to provide certainty for the implementation of IKN and provide confidence in the
investment potential of business actors in IKN, the Government of the Republic of Indonesia has included a
Bill on the Amendment of Law 3/2022 in the Priority National Legislation Program. On the basis of publicly
available information, the Bill on the Amendment of Law 3/2022 will regulate the OIKN special authority,
structure of government, land and transfer of land rights, and certainty of IKN development.
Key Takeaways
1. GR 17/2022 has provided opportunities for business entities to invest in IKN projects, one of which can be
done with the IKN PPP scheme.
2. OIKN has the right to be given priority in the purchase of land in IKN, and any transfer of land through sale
and purchase must be approved by the head of OIKN; however, by cooperating with the
OIKN/Ministry/Institution that possesses the BMN and/or ADP (as applicable), the current regulation
enables business actors to utilize land that is either BMN or ADP.
3. The government has issued a set of regulations governing the procedures for implementing IKN PPP, by
which arrangements, the government of the Republic of Indonesia has provided special features that differ
from conventional PPP arrangements, including those related to PPP procedures in general, the form of
return on investment of business entities, and forms of government support and application procedures,
which are expected to provide added value for potential investors to invest in IKN through the IKN PPP
scheme.
4. The IKN Master Plan and Details of the IKN Master Plan outline the types of infrastructure projects that are
eligible for cooperation under the IKN PPP scheme, particularly in Stage I (2022–2024), and if a business
entity is interested in becoming an IKN PPP project initiator, it may apply to become a project initiator in
accordance with the stages outlined in Bappenas Regulation 6/2022.

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The article above was prepared by Dentons HPRP’s lawyers

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